6 Signs Your Business Should Hire a Collection Agency
Many businesses struggle with delinquent accounts and wonder when it’s time to bring in outside help. Unpaid debts can drain your cash flow and distract your staff from more productive work. While it’s admirable to try handling collections in-house, there often comes a point where doing so is no longer effective (or cost-effective). How do you know when that point has arrived? Here are six clear signs that your business should consider hiring a professional collection agency:
1. Accounts are more than 90 days past due with no payment in sight.
One of the clearest indicators is ageing receivables. If you have invoices or customer accounts that are 90+ days overdue, take notice – 90 days is a critical threshold in debt collection. At that point, the odds of collecting the full amount begin to drop dramatically as more time passes. A customer who hasn’t paid for three months may be testing the limits, and if they see you haven’t acted, they might continue to delay or default entirely. Rather than letting a 90-day delinquency turn into 120 days or 6 months, consider involving a collection agency once invoices cross the 90-day mark. Professional agencies have the systems to escalate the matter firmly and promptly. By acting at or before this point, you can prevent further emboldening of non-payers and improve your chances of recovery. In short, don’t let debts age indefinitely – if 3+ months have gone by without progress, that’s a strong sign to get help.
2. Customers have stopped responding to your calls or messages.
Do you have clients who ghost you when payment is due? Perhaps you’ve sent multiple reminders, made calls, and even resent invoices, but the customer is non-responsive or evasive. This is a classic sign you may need a third party to step in. Sometimes a debtor will ignore the original creditor (you) hoping the debt will be forgotten or written off. They might screen your calls or leave emails unanswered. If you find that your team is spending more time chasing a customer than the customer spent owing the debt, it’s time to consider outside help. Collection agencies are skilled at persistent yet lawful follow-up. Moreover, the involvement of an external agency often signals to the debtor that you’re serious, prompting them to respond. An agency can also employ skip tracing techniques to find updated contact info if the debtor has moved or changed numbers. Bottom line: if a customer won’t communicate or continually avoids you, that’s a strong indicator to bring in a collection professional who can dedicate the necessary time and strategies to get a response.
3. You’ve received bounced cheques or broken promises of payment.
Another warning sign is when a debtor’s payments start failing – for example, a cheque bounces due to insufficient funds, or a promised payment installment never arrives. A failed payment is a red flag that the debtor may be in financial trouble or not prioritizing your debt. Maybe they’ve sent a cheque that didn’t clear, or they repeatedly say “the check is in the mail” and it never comes. These are signs that the customer might be stringing you along or is unable to pay and just buying time. In such cases, swift action is needed. A collection agency can intensify the pressure (within legal bounds) or discuss alternate arrangements. For instance, professionals know when to push for a lump sum versus setting up a structured payment plan. They also know how to verify if the debtor is paying others but not you, which could mean you need to act quickly to get in line before the money runs out. Especially if a customer’s payment fails once, and certainly if it fails twice, you should strongly consider handing the account to an agency. It often means the debtor is prioritizing other creditors or facing serious cash flow issues. An agency will have more leverage to get your debt moved up in their priority list or advise if legal action should be the next step.
4. Your in-house team is overwhelmed or not equipped for collections.
If managing overdue accounts is draining your staff’s time and morale, that’s a sign to outsource. Many small and mid-sized businesses don’t have a dedicated collections department – the task falls to the finance team, office manager, or even the business owner. When these team members are stretched thin, important follow-ups can slip through the cracks. Perhaps your accounts receivable personnel are juggling so many roles that collections take a back seat. Or they simply lack the training and tools to effectively negotiate with delinquent customers. It’s not uncommon for staff to feel frustrated and exasperated after making the same call for the tenth time with no result. Meanwhile, their primary duties (like managing current invoices or other accounting work) suffer. If this scenario sounds familiar, a collection agency can provide relief. Agencies employ collectors who are highly trained in negotiation and persistence, with techniques that your staff might not know. Moreover, agencies work on a “no collection, no commission” basis, so they are motivated to succeed and you don’t pay unless they do. By turning difficult accounts over to professionals, you free your team to focus on core tasks like serving current customers or managing new sales, rather than chasing old debt. Overburdened staff and collection fatigue are strong signs it’s time to get external help involved.
5. You’re being too lenient because you fear damaging the customer relationship.
Many business owners hesitate to push delinquent customers too hard, especially if it’s a long-time client or someone with whom they have a personal rapport. You might have given repeated extensions or simply avoided tough conversations because you don’t want to sour the relationship. Unfortunately, chronic leniency can backfire – some customers will take advantage of your kindness, delaying payment further because they sense you’re not going to enforce the terms. If you find yourself saying, “I don’t want to upset them, so I’ll wait a bit longer,” that’s a potential sign to involve a neutral third party. A collection agency provides a buffer: they can be the “bad cop” enforcing payment while you remain at arm’s length. In fact, handing over a debt to an agency can simplify your interactions with that customer going forward. You can focus on maintaining a positive relationship in other aspects, while the agency handles the uncomfortable payment conversations professionally. A good agency understands the importance of your customer relationships and will aim to collect without burning bridges. If your politeness and patience aren’t yielding results, and you worry pressing harder yourself might ruin the relationship, that’s a clear signal to let an agency step in. They will be firm but respectful, ensuring that your interests are protected while still treating the customer fairly – often preserving the possibility of future business once the debt is resolved.
6. You’re considering writing off the debt entirely.
When you reach the point of thinking “Maybe we should just write this off and move on,” it’s definitely time to try a collection agency if you haven’t already. Writing off a debt means accepting a complete loss, and that should be the absolute last resort. Before you give up on those dollars, why not let a professional collection agency take a crack at it? You have little to lose at that stage – if the agency operates on contingency, no recovery means no fee, so attempting collections externally won’t cost you out-of-pocket if they fail. On the other hand, if they succeed, you get at least a portion (if not all) of your money back. Businesses often consider write-offs because the effort to collect seems too high or they’ve exhausted what they know to do. But collection agencies exist for exactly these tough cases. They have resources like legal networks, credit reporting, and other strategies that can induce payment where your efforts fell short. For example, the debtor might respond to an agency’s demand letter printed on official letterhead even if they ignored all your company’s letters. Also, agencies can advise if a debt is worth pursuing in court or if the debtor has assets, etc. So, if you’re on the verge of giving up on a debt, hand it to a collections agency first.
The Bottom Line
In summary, if any (or especially if multiple) of these signs apply to your business, it’s a strong indication that partnering with a collection agency could be beneficial. Professional collectors bring expertise, systems, and persistence that can turn delinquent accounts into cash in your pocket. They also ensure you remain compliant with collection laws, and they free up your time to focus on running your business. While hiring a collection agency is a significant step, waiting too long to take that step can cost you more in the end – in uncollected revenue, employee burnout, and lost opportunities. Recognize the signs early, and don’t hesitate to get the help you need to keep your cash flow healthy and your stress levels down.
Remember, asking for help is not a sign of failure; it’s smart management. Collection agencies exist so that you don’t have to do it all alone. If overdue receivables are piling up and causing headaches, reaching out to a reputable, licensed Canadian collection agency might be the best decision you make to protect your business’s financial stability.
If your Canadian business is grappling with overdue accounts, consider reaching out to Vanguard. It could be the difference between writing off losses or recovering what you’re owed. With the right partner, you can improve your cash flow, reduce stress, and focus on what you do best – running your business – while they handle the debt recovery professionally in the background.
Learn more about how Vanguard’s debt collection services can be tailored to your industry and needs by visiting our Services page. Curious about the legal side of debt recovery? Check out Vanguard’s comprehensive Legal Services to see how we handle litigation and judgment enforcement across Canada.
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